Corruption and a murky legal system continue to bemuse American businesses in Vietnam, said Gaurav Gupta, chairman of the American Chamber of Commerce (Amcham) in Vietnam.

Initial interest from potential foreign investors too often doesn’t materialize due to continued problems with corruption, human resource constraints, and the country's overly-complicated, restricted, and unclear licensing and regulatory environment, he said during the annual Vietnam Business Forum (VBF) 2014 held in Hanoi Tuesday.

“For many companies and investors who must fully comply with rules and laws, Vietnam is a very difficult place to be successful and government efforts to “manage” business activity have caused numerous investors to rethink their business and expansion plans,” he said.

AmCham members are frustrated by persistent delays in decision making on key projects and policies. Examples include delays in implementing regulations on important laws and decrees, in advancing key infrastructure projects, and in streamlining administrative procedures, he said.

They look to the government to foster a more competitive environment where decisions are made faster and legal procedures are less complicated, rules are fairly enforced, and companies compete on their merits -- including for access to capital, land and opportunities.

This will provide further encouragement of private enterprise and prepare Vietnam for the many opportunities offered by agreements like the Trans-Pacific Partnership (TPP).

“We urge the government to implement systems that are understood to reduce opportunities for illegal payments. A significant step forward would involve actions that greatly limit the use of cash payments and increasing the use of e- commerce,” he said.

“Our members wish to see initiatives that provide further encouragement of private enterprise, and that enable and facilitate rather than restrict business opportunities. AmCham believes that the business climate can best be helped by actions that increase productivity and reduce the costs and risks of doing business in Vietnam,” said Gaurav Gupta.

Increase foreign ownership

Dominic Scriven of the Capital Market Working Group at VBF said the capital levels in the Vietnamese stock market has remained stuck at $150 million since early this year. The figure is very small compared to FDI, which was estimated at $17.3 billion in the first 11 months of this year.

“The market capitalization of Vietnam’s stock market is very small compared to other ASEAN countries -- it's only about one-fifth of the Philippines’s, or one-tenth of Malaysia’s. This means that Vietnam has not really attracted large or long-term cash flows from foreign investors,” he said.

To mobilize capital, the government should increase foreign ownership. Under existing laws, foreign entities may only own of 49 percent a publicly traded company or a maximum of $6 billion in shares, he said.

“We suggest that Vietnam allow full market access in accordance with its WTO commitments,” he said. “We also suggest that the restrictions on foreign ownership only apply to businesses which involve national security and thus require special conditions or attention.”

Vu Bang, chairman of the State Securities Commission, said international investors will have to wait until at least next June for Vietnam to ease restrictions on foreign shareholders. The country may lift the foreign cap on voting shares in some industries to 60 percent from 49 percent.

The Ministry of Finance has drafted a plan that recommended lifting the foreign cap on voting shares in some industries. However, there are legal issues that require careful consideration and that will take time, he said.

Businesses waiting at the Hanoi Department of Planning and Investment’s desk in charge of dealing with administrative procedure. Photo: Ngoc Thang

Speculation that ownership limits for the $56 billion stock market will be raised helped boost the benchmark VN Index by 22 percent in 2013 and another 12 percent this year. Money managers including Templeton Asset Management and Dragon Capital Group Ltd. have said they’re unable to buy the shares they want due to the caps.

Ensure macroeconomic stability

Speaking at the VBF, Prime Minister Nguyen Tan Dung said Vietnam will speed up reforms to its monetary, labor, and property markets to facilitate development.

Meanwhile, he said inflation will remain below 5 percent and budgetary excesses have been capped at 5 percent of GDP.

Economic growth is predicted to hit 6.2 percent in 2015, according to the prime minister's remarks. Meanwhile, public investment will be kept below the National Assembly's 65 percent
safety cap and will be repaid on time.

The government will focus on restructuring public investment, state-owned enterprises (SOEs) and the banking system next year, the prime minister said.

“We can bring bad debt to below 3 percent (of total loans) in 2015,” he said.

The State Bank of Vietnam predicted that bad debts would amount to between 3.7 percent and 4.2 percent of total loans by the end of 2014.

As for SOE reform, Dung said, the country will privatize 432 SOEs by 2015.

“In addition to along the equalization process, the government is determined to boost the development of the private sector, small and medium-sized enterprises, and attract more foreign investment in Vietnam.”